ISLAMABAD: Asian Development Bank (ADB) has expressed willingness to defer Audited Entity Financial Statements (AEFS) of electricity distribution companies (Discos) till December 31, 2023 to bring Second Power Distribution Enhancement Investment Program on track, saying the auditor’s certificate cannot be treated as an assurance report on compliance with financial covenants.
ADB’s Director Energy Division, Central & West Asia, Department, Joonho Hwang, in a letter to Dr Irfan Abbas Shah has sought submission of documents urgently to put the project back into compliance with the loan financial covenants. ADB had requested some of them in its letter to EAD on October 7, 2022.
Commenting on Islamabad Electric Supply Company’s (Iesco’s) missing information in Audited Entity Financial Statements (AEFS) for FY 2017-2022, ADB maintained that it had sought the auditor’s assurance reports, including the reasonable assurance opinions on the financial covenants on Debt Service Coverage Ratio (DSCR), Self-Financing Ratio (SFR), and Accounts Receivable Turnover Ratio (ARTR), which were missing in Iesco’s AEFS.
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On February 1, 2023, ADB received the auditor’s certificates prepared by Yousuf Adil for the (i) ARTRS for FYs 2017 to 2022; and (ii) DSCR and SFR for FY 2022, which were not included in Iesco’s AEFS for FY 2022 (received on March 20, 2023).
However, the auditor’s certificates were issued under the “Guidelines for issue of certificates for special purposes by practicing Chartered Accountant firms” through the Institute of Chartered Accountants of Pakistan’s Circular No. 03/2016 of February 25, 2016.
In the ‘introduction’ section of the Guidelines “audit/ assurance reports required on financial statements or financial forecast do not fall within the scope of this guidance. For audit/ assurance report respective International Auditing/ Assurance Standards should be consulted. “Hence, the certificates issued by Yousuf Adil cannot be treated as an assurance report on compliance with financial covenants.”
Sharing views on missing assurance report for Audit Project Financial Statements (APFS) for FY 2022, ADB stated that it has received Iesco’s APFS for Loan 3329 prepared by the Director General (Power) on January 3, 2023 which were audited by the Auditor General of Pakistan (AGP), and nil expenditure statement for Loan 3328 which were certified by Yousuf Adil on February 1, 2023.
The certificate issued by Yousuf Adil does not constitute an assurance report. Therefore, ADB has requested to the government submit an assurance report on nil expenditure under Loan 3328 either by the AGP or any private auditor acceptable to ADB. For FYs 2023 and 2024, ADB has reminded Iesco to submit: (i) complete AEFS, including the valid auditor’s assurance report with reasonable assurance opinion on all financial covenants (DSCR, SFR, and ARTR); and (ii) consolidated APFS, covering Loans 3328 and 3329, following Section 2.09 of the Project Agreement.
In the case of Lahore Electric Supply Company (Lesco) ADB says it is following up again on the missing: (i) auditor’s assurance reports, including reasonable assurance opinions on financial covenants; and (ii) LESCO management’s responses to matters raised by the auditor in the AEFS for FYs 2017, 2018, and 2019 (ref. ADB’S letters on January 6,and October 25, 2022).
On non-submission of AEFS for FYs 2020 to 2022, ADB says it will await the AEFS for FYs 2020 and 2021. Lesco has been requested to submit the AEFS for FY ending June 30, 2022 by June 30, 2023.
ADB further contended that it awaited Lesco’s APFS covering from loan effectiveness (May 17 2017) to FY ending June30, 2022 urging the power company to submit consolidated APFS, covering Loans 3328 and L3329, with the auditor’s opinion on loan proceeds and management letter.
On other Discos’, ADB has again reminded the government to submit the APFS or nil expenditure statements with assurance report covering the full period from loan effectiveness to FY 2022 for: (i) Faisalabad Electric Supply Company, (ii) Gujranwala Electric Power Company, (iii) Hyderabad Electric Supply Company, (iv) Multan Electric Power Company, (v) Peshawar Electric Supply Company, (vi) Quetta Electric Supply Company, and (vii) Sukkur Electric Power Company.
Copyright Business Recorder, 2023
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